Income Tax Refund- should I wait?

[andysmom]

Hi, everyone. I appreciate all of the great advice & before I call my atty again, I thought I'd pose this question to you guys & get opinions first.

We're getting ready to file chapter 13- planning to do so the 3rd week of this month. Our CPA finally said she'll have our taxes done this week (even though we submitted everything in Feb). We are expecting a return of around $6000 (won't know until she finishes exact amount).

If i give them (accountants) a voided check from our new account, I can probably have the refund within a month or sooner.

So, should we wait til we get the refund & spend it down on neccessities (we need roof work, tires for car, husband's truck needs work, catch up on utilities,etc) OR should we HOPE the atty can exempt most of it in and go ahead and file as planned this month?

We are now about 1-2 months behind on credit cards. Mortgage is current/ never been late.

I don't want to annoy the atty and seem like i'm putting it off or wasting his time- i really am going to file- i'm just trying to time this best for us.
I can still pay the atty the end of the month so as not to have him think I'm wasting his time (he's never said anything lke that at all- that's just me thinking)

I just don't want to take the chance of losing the refund money whenn need so much done here and 5 years is a long time in a plan.

So....
what would you all do?

[SMinGA]

Check out your state's exemptions - and if there IS a way to exempt it you'll know. If not, then get the refund back and use it wisely before filing.

[andysmom]

we're in pa/ using the federal exemptions. our lawyer in the begining said he thinks he can exempt most of it in, but when i look at the federal list of exemptions i don't see anything for cash exemptions. so i should probably get it then file.
i was hoping to get it sooner, but our accountant drug her feet wit getting the return done.

[SMinGA]

Federal has a wildcard of $925. And unused homestead exemption up to $10,125 can be used as additional wildcard. So that is $11,150 of wildcard, useful for any asset even cash.

I'm not very familiar with federal, so don't know if that can be doubled for married/filing joint. But if you do not have equity, or much equity, then being able to use up to $11,150 wildcard would cover your refund. Unless you need the wildcard on other things.

[andysmom]

we have about 36,000 or so in equity (appraisal was done in dec when we refianced).
I'm just really nervous because we have alot of stuff to do here and catching up to do (utilities,etc).
At 1-2 mo behind on cc's, I hope 1 more month wouldn't be a huge problem to wait.
I just don't want to get my atty upset / i'm definately filing (unfortunately, no choice) I just don't want the lawyer to think i'm wasting his time. I can pay him the end of this month- i just really don't want to lose our refund when we have so much that needs to be done. with both old cars needing work (a 2001 & 1998) I'd like to get that done & my roof fixed before going into a 5 yr plan.

[SMinGA]

I believe the federal (total) homestead was $20,200. No longer on that page... And the unused homestead, up to $10,125, can be claimed as a wildcard.

I guess the main question is if the figures can be doubled for married/filing joint? If so, you'd have ~$40,400 less 36,000 = $4,400 unused homestead exemption. Plus $925 regular wildcard, or $925 x 2 if that can be doubled also.

[andysmom]

the homestead is doubled acc'ding to atty. i don't know about the wildcard.
i just called our accountant's office, they promised to have it done before the deadline of apr 15th, they're going to efile & i gave him our new chking acct info to have it direct deposited- he said usually about 10 days or so after you file it's in yuor account.
I just called atty- he said for me to calm down and it's fine to wait to get the refund and then file - he said not to think he's mad or anything like that- whatever we want to do is fine & if we wait another month all he'll need is to update another month of paystubs. so he was great and i'm a little more relieved. i don't want to lose money we really really need just over a few weeks time. so i guess we'll file in may / how early depends on how soon we can get our refund back.
I'm still going to drop off the stty's check in 2 weeks so he sees that we are serious/ just trying to be prepared.

[sheilaE]

We recently received $8000.00 from our refund. Our atty said spend it-don't let it sit in our accounts. I couldn't believe how fast we spent it. We set aside the atty's fee, got caught up on utilities, cable, cell phone bill, groceries, kids clothing, a few small home repairs, down payment on a used car....it went fast! I also asked the atty what will the trustee say when they see we don't have any money left. Our atty said....we'll tell them you spent it. Nothing they can do about it. He also said just don't take a trip to Hawaii. Spend it wisely. We are filing in CA., so maybe that makes a difference.

[andysmom]

hi,sheilaE
our atty originally said if we get it before we file, spend it down on reasonable things too. problem is our cpa drug her feet & didn't do the return yet & we had planned on filing in 2 weeks and i'm afraid we won't be able to exempt it all in and we really really need it. our one part of our roof is leaking, both cars need some minor repairs & mine needs tires, i have overdue utililties & stuff like that we were going to use our refund for.
i talked to the accountant today who swears she'll have it done by the deadline & is efiling w/direct deposit so we should have it about 10 days or so after she files it.
i also talked to my atty who said no problem with waiting a little bit longer- i just don't him thinking i'm putting him off or wasting his time. I just seriously can't take a chance at losing the refund when there's so much that needs to be done.

[SMinGA]

Andysmom - it will probably make no difference to your atty if you file in 2 weeks, or on April 30th. As long as you file in April, it will use Oct-March for look back so no need to update those figures. The only thing to update would be your bank account balances - and you'll need to update that no matter when you file.

You'll also want time for the payment to 'clear' if you pay your atty by check, unless your balances fall under exempt amounts with it.

[andysmom]

sminga- i really respect your opinions and value all of the great advice you have given me since finding this forum, if you were me, would you wait & spend it down or file & try to exempt it in?
I don't want to make a mmistake or do anything that would be questioned.
If it is exempted in, does the trustee tell you what you can spend it on or is it "your" money?
Thanks again everyone

[SMinGA]

If its exempt, its your money. To spend (or not) as you please.

If you don't have a pressing need to file this month (such as to avoid legal action from a creditor, or because the 6 month look back will be different if you file in May) then just wait until the refund is in, spend some of it on what is needed - then arrange w/ your atty for when is best to file.

[andysmom]

can you spend some of it and then exempt some in?
filing so close to getting the refund (and spending some)- will this be questioned / looked upon badly by a trustee?

[SMinGA]

Yes to the first part. Your petition should show cash/bank account values at time of filing and those will need to be exempted. Whatever is spent before filing should be reasonable/necessary. Groceries, clothes, repairs, etc. are all reasonable. Flying to Hawaii for the weekend would not be a good idea however.

It should not create issues for the trustee. That is why the spending should be on routine, customary things. From personal history, I know its easy to reach a point where you feel guilty to spend ANY money. But bankruptcy is not about living in thread bare clothes and eating PB&J all the time. No need to feel guilty about buying things your family needs. (Still hard to overcome that reaction though.)

can you spend some of it and then exempt some in?
filing so close to getting the refund (and spending some)- will this be questioned / looked upon badly by a trustee?

[andysmom]

thank you,thank you,thankyou for putting my mind at ease and making this process a little easier